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porca misèria

We're All The Top 1%

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Oxfam's report has grabbed headlines. But what do they mean? The report makes no attempt to tell us: instead it bangs on about a tiny number of billionaires, without bothering to tell us how any of the numbers are derived or even citing sources.

Googling "World Wealth" finds a total figure of $64.3 trillion in 2016 (the year Oxfam tells us the 1% will own half that wealth). Divide that by seven billion people and we get a global average per head of just over $9k.

What about that 1%? Half that wealth is $32.15 trillion; 1% of seven billion is 70 million. So the average wealth of the 1% is $459k (£300k). There must be millions who have that much in housing wealth alone, putting them above average within that 1%. Then there are those of us who are landless peasants but own more than that in other assets.

But that still excludes a huge asset class: a big chunk of Brits' wealth takes the form of Entitlements. The basic state pension alone is worth £200k, and even the poorest Brit is entitled to that. Not so far off the top 1% already!

Let's consider those two assets: pension entitlement and housing. By the time you reach pension age, you either own your own house, or you have an additional entitlement to housing benefit, which in itself is worth more than that £100k to propel you into the top half of that top 1%. And that's without even beginning to count a bunch of other Entitlements.

Now it's true, that's just the theory of housing benefit, and it doesn't always work like that in practice. But still, it must be quite hard to find a Brit who's not merely in the top 1%, but above average within that 1%.

Hang on! There are far too many Brits for that to be possible! Perhaps all we can conclude is that the Oxfam headline is basically misleading spin.

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Yes, the BBC looked at this:

Figures in focus

Oxfam based its prediction on data from the annual Credit Suisse Global Wealth datebook, which gives the distribution of global wealth going back to 2000. It uses the value of an individual's financial and non-financial assets, mainly property and land, minus their debts to determine what individuals "own".

The data excludes wages or income.

The BBC's head of statistics, Anthony Reuben, said in order to be part of the wealthiest 1% of the world's population, an individual would need to be worth just over half a million pounds.

"So it is not necessarily talking about people who own yachts and ski chalets. Owning an average house in London (without a mortgage) would just about put you in the 1%. "

He also noted that Oxfam had chosen to use figures which showed the disparity between the 1% and the rest of the world in the worst light.

"From 2000 until 2009, the proportion of wealth held by the wealthiest 1% fell every year. From 2010 until 2014 it rose every year. Oxfam has taken the figures since 2010 and used them to extrapolate what will happen in the coming years. Clearly, that is the methodology that will make inequality look the most severe," he added.

http://www.bbc.co.uk/news/business-30875633

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The basic state pension alone is worth £200k, and even the poorest Brit is entitled to that.

It's gone up quite a lot since I checked on Google 30 seconds ago.

Edited by Ghostly

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A good propotion of the assets the 0.001% claim to have are notional...there isnt the money to pay them.

Then again, they will make sure they are first in the queue when the runs start.

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It's gone up quite a lot since I checked on Google 30 seconds ago.

I never knew Google was an annuity provider. Why doesn't it tell me if I google for annuities?

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Oxfam rep was on R2 last night...he said to get into the top 1% you would have to have a wealth of $2.7million.

However, given savings rates of 1%, a salary of £20k would be the same as a yield on $2.7million.

Personally, i prefer to talk in terms of income. 90% of wealth disparity could be virtually wiped out if the govt quit fabricating money or stopped the private banks from doing so.

The Oxfam rep wasnt very impressive either way. Didnt talk about methodology, just said 'theyre IMF figures' or something (so I guess oxfam didnt bother to actually look into how they were arrived at)

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A good propotion of the assets the 0.001% claim to have are notional...there isnt the money to pay them.

Then again, they will make sure they are first in the queue when the runs start.

There's no money to pay the 200k that Porca has put on boomer's balance sheets regarding the State Pension either, and no money to pay for the free NHS insurance probably also worth about 200k at retirement. Guess that makes even the penniless in the 1%, so long as the Ponzi can be sustained.

Edited by crashmonitor

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I never knew Google was an annuity provider. Why doesn't it tell me if I google for annuities?

You're saying that people put their £6k/year basic state pension into an annuity instead of using it to pay for food, bills, etc?

Edited by Ghostly

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There's no money to pay the 200k that Porca has put on boomer's balance sheets regarding the State Pension either, and no money to pay for the free NHS insurance probably also worth about 200k at retirement. Guess that makes even the penniless in the 1%, so long as the Ponzi can be sustained.

the public sector promise isnt an annuity though.

That only comes into play when a worker loses his job and needs compo for the benefits lost...

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The Oxfam rep wasnt very impressive either way. Didnt talk about methodology, just said 'theyre IMF figures' or something (so I guess oxfam didnt bother to actually look into how they were arrived at)

I think that's the point.

As with so many headline-grabbing reports from pressure groups, Oxfam's report has no more substance to it than my back-of-an-envelope calculation in the first post of this thread.

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The basic state pension alone is worth £200k, and even the poorest Brit is entitled to that. Not so far off the top 1% already!

Only people over retirement age are entitled to the state pension, for the rest of us it's a promise from an insolvent institution. As I am about 40 years from retirement I value that promise at zero.

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Only people over retirement age are entitled to the state pension, for the rest of us it's a promise from an insolvent institution. As I am about 40 years from retirement I value that promise at zero.

+ 1

I can't think of anyone I know in my own age group who is actually expecting to get a state pension or, for that matter, thinks that the NHS will still be free at the point of service in their old age.

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Some odd math in this thread.

The basic state pension of 6K is worth 200K If you manage to live for 33 years after first claiming it.

The norm is 12-14 years I believe. That's 84K tops then. Where's the other 116K been conjured from?

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When I hear the pensioners still working that are in my industry moaning about how they paid in their whole lives, I like to ask them how much state pension they think I will get in 30 years when I retire. None of them seem able to reassure me that I will receive anything for the 24 years contribution I have already made up to this point.

People really need to get over the idea that they are paying into their own state pensions when what they are in fact doing, and what every generation has done since the state pension was introduced, is funding the current crop of pensioners. I'm sure you know this, it just seems to be a common misperception that seems to drive the kind of moaning you're talking about and blind people to the fact that they are complaining about their lot to others who are less well off!

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Some odd math in this thread.

The basic state pension of 6K is worth 200K If you manage to live for 33 years after first claiming it.

The norm is 12-14 years I believe. That's 84K tops then. Where's the other 116K been conjured from?

The state pension (£140/week = £7k) is entirely equivalent to an annuity, with index linking and backed by government.

The cost of that annuity is £200k. If you treat an insurance company and the government as equally safe, then the pension and the annuity have equal value.

[edit] Actually the "triple lock" means the state pension is worth more, so long as that lasts. And it's going to take a strong politician to remove it!

Edited by porca misèria

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The state pension (£140/week = £7k) is entirely equivalent to an annuity, with index linking and backed by government.

The cost of that annuity is £200k. If you treat an insurance company and the government as equally safe, then the pension and the annuity have equal value.

[edit] Actually the "triple lock" means the state pension is worth more, so long as that lasts. And it's going to take a strong politician to remove it!

The current basic State Pension is £113,00 per week not £140 so the total per annum is £5876

https://www.gov.uk/state-pension/overview

The new state pension intrioduced in 2016 will be £148.40 or £7722 but will only be payable to people retiring after April 2016 who have paid full Class 1 NIC for 35 years. It will not be payable to existing pensioners who will continue to be paid at the existing rate. Nor will it be paid at that rate to members of private pension schemes who have paid Class 1 NIC at the contracted out rate who will receive a lower amount

https://www.gov.uk/new-state-pension/overview

Current estimates are that only 45% of pensioners between 2016-2021 will qualify for £148.50 a week

http://www.bbc.co.uk/news/business-30777166

Edited by stormymonday_2011

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People really need to get over the idea that they are paying into their own state pensions when what they are in fact doing, and what every generation has done since the state pension was introduced, is funding the current crop of pensioners. I'm sure you know this, it just seems to be a common misperception that seems to drive the kind of moaning you're talking about and blind people to the fact that they are complaining about their lot to others who are less well off!

Fact is that it's a convenient collective lie. Very few people are altruistic enough to want to pay for other people's pension, but allow them to vaguely believe they are saving for their own and they'll just about tolerate it. Even the name National Insurance suggests there is some kind of pot set aside to pay out. In reality, it's just another tax and this cash (and more) is spent already.

The difficulty now, of course, is that many of younger generation now longer believe the myth, and for various reasons the Government has chosen not to shore up the fantasy. Probably so we'll increasingly take responsibility for our own old age (and their pension company friends will benefit). Dangerous game if they get it wrong I'd suggest as the murmuring of disquiet could easily become open rebellion against National Insurance (another convenient lie for hiding how much you get taxed). It's one thing to pay for some old codger you don't know to have a rest, it's quite another to realise you'd never get to be that old codger yourself.

Something has to give somewhere because between paying for an expensive university education, buying an overpriced house and funding your own retirement while competing in an increasingly fluid and globalised labour market - I don't see how the average twenty/thirty somethings (and some forty somethings) are going to do it.

Edited by StainlessSteelCat

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The difficulty now, of course, is that many of younger generation now longer believe the myth, and for various reasons the Government has chosen not to shore up the fantasy. Probably so we'll increasingly take responsibility for our own old age (and their pension company friends will benefit). Dangerous game if they get it wrong I'd suggest as the murmuring of disquiet could easily become open rebellion against National Insurance (another convenient lie for hiding how much you get taxed).

There was a move from some Tory backbencher to rename it 'earnings tax' which I quite like as it highlights how earned income is more highly taxed.

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The state pension (£140/week = £7k) is entirely equivalent to an annuity, with index linking and backed by government.

The cost of that annuity is £200k. If you treat an insurance company and the government as equally safe, then the pension and the annuity have equal value.

[edit] Actually the "triple lock" means the state pension is worth more, so long as that lasts. And it's going to take a strong politician to remove it!

Why is the cost of that annuity 200K?

Says who?

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Why is the cost of that annuity 200K?

Says who?

The pensions industry. See for example https://www.hl.co.uk/pensions/annuities/annuity-best-buy-rates

It's not 100% like-for-like. In particular, there's no triple-lock option (the best available is RPI single-lock). But it's pretty clear from there, an index-linked pension at age 67 or 68 and starting at £140/week is going to cost £200k.

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The index-linked pension would cost £200K if it were provided by the financial industry parasites that run those shockingly-poor-value products. But it isn't, it costs basically what the cost is to the taxpayer, which is the actual aggregated value (the eighty-odd thousand mentioned by another poster), plus the cost of administering the scheme. Nothing even approaching £200K, which is why any unbiased analysis always shows what poor value private pensions - that pay huge middle-man payments to the provider - are compared to a state pension.

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The current basic State Pension is £113,00 per week not £140 so the total per annum is £5876

https://www.gov.uk/state-pension/overview

The new state pension intrioduced in 2016 will be £148.40 or £7722 but will only be payable to people retiring after April 2016 who have paid full Class 1 NIC for 35 years. It will not be payable to existing pensioners who will continue to be paid at the existing rate. Nor will it be paid at that rate to members of private pension schemes who have paid Class 1 NIC at the contracted out rate who will receive a lower amount

https://www.gov.uk/new-state-pension/overview

Current estimates are that only 45% of pensioners between 2016-2021 will qualify for £148.50 a week

http://www.bbc.co.uk/news/business-30777166

Of course if you have not contributed at all, zero savings will go with the territory, then you will be rewarded with the full rate of £148.40. Plus all the other goodies on offer like DLA and housing benefit.

Edited by crashmonitor

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The pensions industry. See for example https://www.hl.co.uk/pensions/annuities/annuity-best-buy-rates

It's not 100% like-for-like. In particular, there's no triple-lock option (the best available is RPI single-lock). But it's pretty clear from there, an index-linked pension at age 67 or 68 and starting at £140/week is going to cost £200k.

To be honest all that really highlights to me is what poor value private pensions can be (and how many middle men must be taking a cut).

I know there's obviously an admin cost to a state pension (if you want to treat it like a private annuity), but the cost of delivery plus the cost of the state pension itself (average is below 80K per individual still) doesn't equal 200K.

You're comparing apples with oranges really.

If you add pensioner NHS costs, HB costs, free bus passes, heating allowances, and care home costs into the mix then yeah... you'd be well past the 200K.

I'm pretty close to my state pension now. Don't need it but glad it's there.

I do think pensioners get too much. Or at least they escape most of the bile spewed at those who need state help (instigated by private firms/banksters looking to move state debt over to personal debt because of more favourable interest rates no doubt).

I'll give back my state pension when big corporations and the 1% stop fiddling their taxes and gaming the system in their own interests...

Edited by byron78

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On the basis Oxfam stated the figures, I don't find them misleading, just awkward to interpret. Britain is a wealthy country relative to the rest of the world (at least our housing is costly) so would expect to have a notably higher proportion in the 1%. But even then £300K is far more than most individuals wealth in the UK (houses usually have at least two residents, and non-private pension entitlement doesn't count). I suspect the figures would be more telling if Oxfam also gave the % of total wealth held by the top 0.1%, 0.01%, and 0.001%.

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